How do we move from Open Banking to Open Finance?

One year ago, we established the Fintech Strategic Investments team at Eight Roads to back disruptive entrepreneurs who are looking to shape the future of finance. Led by Alokik Advani, who joined us from Goldman Sachs PSI, we’ve built a team with deep domain expertise, access to an extensive network across Fidelity and Eight Roads, a long-term investment focus and a single source of capital.

The FSI team is focussed on the wealth and asset management sector, which has been largely shielded from the fintech revolution thus far. Digitisation has been applied only at a surface-level and we are exploring a number of themes that we believe will fundamentally change the way we all manage our money.

One such theme is the future ‘openness’ of consumer finance. Our view is that ‘open banking’ is just the beginning and over time customers will expect to access, control and share the data that sits behind the full range of financial services including mortgages, insurance, pension, loans, savings and investments. This should result in better outcomes for customers as they receive appropriate financial advice on their whole financial picture — something only afforded to the richest 1% in society today.

To share and debate our views on the topic, we hosted our first content-led dinner in London last week, focusing on ‘The Road to Open Finance’. Guests included fintech founders, investors and industry experts, including Huw van Steenis, who served as Chair of the Future of Finance Review at the Bank of England and Imran Gulamhuseinwala, the Implementation Trustee for Open Banking.

We kicked off the discussion on how we move from Open Banking to Open Finance; exploring the opportunities and challenges faced by the wider industry. It inspired an open and lively roundtable conversation, here are some of the key takeaways:

• Adoption is building: there are over 90 third party provider’s signed up to access Open Banking data to provide solutions in credit, payments, budgeting and SME services and the waitlist includes another couple of hundred companies. API calls are growing ~30% monthly, with over 100 million successful API calls so far
• Customer experience is still poor: The frustration from a fintech perspective is that while banks have met the requirements of the regulation, user experience is often clunky and results in customer drop-off. One such example is the forced renewal of credentials every 90 days, which is a blunt instrument to an authorisation problem that could be solved in alternative ways
• Banks need to grasp the opportunity: When the regulations were first announced most banks convinced themselves they would be watered down or rescinded. As they slowly moved from a phase of denial to acceptance, the approach has been to simply comply with rules — largely at the expense of customer experience. However, there is an opportunity to embrace their position as a trusted data holder and begin to build commercial models around premium APIs, for instance in the ID verification space. Similarly, a few banks have recently begun to understand the richness of their data to build better customer experiences themselves or to partner with fintechs
• Look to the Aussies: While the UK has led the way with Open Banking, Australia has put in place a more expansive long-term vision that includes customer-enabled access to the full range of financial products and which could foster even greater innovation

While everyone agreed that Open Banking regulations have helped spur the transition of financial services into the data age, the journey to full open finance will likely be drawn out and turbulent. Standardisation of APIs across a handful of UK banks for current accounts has proven highly complex, so extending that across the financial landscape will be a challenge, but ultimately one worth striving towards.

We very much look forward to hosting similar thematic events — and debates — over the next few months, let us know your thoughts and any future themes that you’d like to see covered.